Question

The 2016 financial statement of Willamette Valley Vineyards reported Cost of goods sold of $7,204,884. Note 3 to the financial statements reported that Inventories consisted of: 2016 2015 Winemaking and packaging materials $ 817,836 $ 690,292 Work-in-process 6,634,014 6,058,701 Finished goods 4,518,806 3,883,469 Total inventories $11,970,656 $10,632,462 The inventory turnover for 2016 was:__________

a, 0.57
b. 0.64
c. 0.59
d. 1.71

Answer 1

b. 0.64

Step-by-step explanation:

The computation of the inventory turnover for the year 2016 is shown below:

Inventory turnover = Cost of goods sold ÷ Average inventories

where,

Average inventories is

= ($11,970,656 + $10,632,462) ÷ 2

= $11,301,559

And the cost of goods sold is $7,204,884

So, the Inventory turnover is

= $7,204,884 ÷ $11,301,559

= 0.64 times

We simply applied the above formula